Sverdrup output may reach 650,000 barrels a day, Statoil says

2/13/2014

Sverdrup output may reach 650,000 barrels a day, Statoil says

BY MIKAEL HOLTER

STAVANGER, Norway (Bloomberg) -- Statoil ASA will develop the Johan Sverdrup field with four offshore installations initially and said peak output from Norway’s biggest find in decades may be higher than previously estimated at 650,000 barrels a day.

Investments in the first phase are seen at 100 billion kroner ($16.4 billion) to 120 billion kroner, including the field center, wells, export solutions for oil and gas, as well as power supply, Stavanger-based Statoil said in a statement today. That estimate includes “contingencies and provisions for market adjustments” as well as measures for improved recovery, the company said.

Sverdrup is expected to reach an initial output of 315,000 to 380,000 barrels of oil equivalent a day and peak at between 550,000 to 650,000 barrels a day, Statoil said. That compares with a September estimate of as much as 600,000 barrels a day, given by Lundin Petroleum AB, which holds a stake in the field.

“The update is very positive, implies reduced uncertainty and should be a share price trigger, in particular for Lundin and Detnor,” Teodor Sveen Nilsen, an analyst at Swedbank First Securities in Oslo, said by email. “Indications for plateau production, recovery rate and capex are all better than we have assumed.”

Discovered in two parts by Lundin in 2010 and Statoil in 2011, Sverdrup renewed optimism in Norway’s oil industry after a decade of falling output from aging North Sea fields. The oil discovery could supply as much as 25 percent of Norway’s oil production 10 years from now.

“This is historic,” said Arne Sigve Nylund, executive V.P. for development and production in Norway, in the statement. “We have not made a concept selection for a field this size since the 1980s.”

Statoil estimated in December that Sverdrup holds as much as 2.9 billion barrels of oil equivalent even as it cut its resource estimate and delayed the start of output by a year. The recovery rate is seen at 70 percent, the company said today.

The plateau production guidance is “a real positive surprise,” Andre Baustad Benonisen, an analyst at Danske Bank Markets, said in a note. “While it is not clearly stated, we believe the current resource estimate” is based on 55 percent recovery, he wrote.

Sverdrup is expected to be in production for 50 years, Statoil said. Powering from land will reduce carbon emissions from the Utsira High area by 60 percent to 70 percent, it said.

Shares in Statoil fell 1.4 percent to 157.7 kroner as of 10:25 a.m. in Oslo. Lundin gained as much as 5.3 percent to 127.9 kronor in Stockholm, while Det Norske Oljeselskap ASA, which also owns a stake in the field, jumped as much as 4.8 percent to 70.5 kroner, the highest intraday level in almost two months. Detnor traded 3.3 percent higher as of 10:25 a.m.

A.P. Moeller-Maersk A/S’s Maersk Oil and Petoro AS are the other shareholders in Sverdrup.